Ratio of Debt to Income

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The ratio of debt to income is a tool lenders use to determine how much of your income can be used for a monthly home loan payment after all your other recurring debt obligations are met.

Understanding the qualifying ratio

For the most part, underwriting for conventional mortgages needs a qualifying ratio of 28/36. An FHA loan will usually allow for a higher debt load, reflected in a higher (29/41) ratio.

The first number in a qualifying ratio is the maximum amount (as a percentage) of gross monthly income that can go to housing (this includes mortgage principal and interest, PMI, homeowner's insurance, property taxes, and HOA dues).

The second number is the maximum percentage of your gross monthly income which can be applied to housing expenses and recurring debt. For purposes of this ratio, debt includes credit card payments, vehicle payments, child support, etcetera.

For example:

28/36 (Conventional)

• Gross monthly income of $4,500 x .28 = $1,260 can be applied to housing
• Gross monthly income of $4,500 x .36 = $1,620 can be applied to recurring debt plus housing expenses

With a 29/41 (FHA) qualifying ratio

• Gross monthly income of $4,500 x .29 = $1,305 can be applied to housing
• Gross monthly income of $4,500 x .41 = $1,845 can be applied to recurring debt plus housing expenses

If you'd like to calculate pre-qualification numbers with your own financial data, please use this Mortgage Loan Pre-Qualification Calculator.

Just Guidelines

Remember these ratios are just guidelines. We'd be thrilled to pre-qualify you to help you figure out how large a mortgage loan you can afford.

County-City Credit Union can answer questions about these ratios and many others. Call us: 920-674-5542.